Bipartisan Medicare Reform Plan Unveiled

WASHINGTON -- A Democrat from the Pacific Northwest joined forces with a Midwest Republican on a Medicare overhaul plan combining a private insurance option with subsidized premiums -- a scheme that critics say is more red than blue-blooded.

Sen. Ron Wyden (D-Ore.) and Rep. Paul Ryan (R-Wisc.) released their plan -- they have not yet introduced formal legislation -- with the explanation that it would promote competition, always a popular notion with the GOP, yet retain Medicare as an option for seniors, something Democrats have pledged to do.

The Wyden-Ryan plan would not make any changes to Medicare for those who are currently 55 or older. Starting in 2022, a "Medicare Exchange" would be established which would offer traditional Medicare along with private insurance plans.

Skeptics may think that sounds like the current Medicare Advantage plans, which are offered by private insurers, but Wyden and Ryan said their new system would supplant Medicare Advantage.

"Premium-support payments" would be given to those who need it, and they would be tied to the cost of the second-lowest level private plan, or traditional Medicare, whichever is lower.

The amount of money wouldn't differ by the plan a given beneficiary chooses (although it would be adjusted to reflect differences in regional costs). That means that a person who selects a plan with a high level of benefits would have to pay more out-of-pocket than a person who selected a low level plan.

Poorer seniors would get additional assistance, and wealthier seniors would get less assistance.

Ryan's earlier proposal was largely referred to as a "voucher" because it proposed to index financial assistance to a person's income. Premium support, on the other hand, indexes financial assistance to how much a given insurance plan costs.

A new paper from Brookings and the Bipartisan Policy Center released Friday reviewed both sides of the premium support issue, with James Capretta, of the Ethics and Public Policy Center, taking the pro side and Henry Aaron, of Brookings, arguing against it.

Capretta argued that "Quite a lot has changed in last forty-six years [since Medicare was created] so it should not be surprising that the program is due for an update." Premium support and a Medicare exchange would build in a competitiveness that is seen elsewhere in the U.S. market, and in Medicare Part D, even.

Seniors would still have access to medical coverage, he argued.

"That wouldn't change with premium support," Capretta wrote.

Meanwhile, Aaron, one of the original economists to come up with the concept -- he coined the phrase "premium support" -- said that although underwriting premium cost may save money, it is not an option used by other industrialized nations -- all of which are spending less on healthcare than the U.S.

He also argued it would be difficult to run an exchange of entirely elderly people, and said the more immediate challenge is to allow the exchanges created under the ACA, which would entirely for people under the age of 65, to work before testing the plan out in and older population.

Ryan and Wyden said that allowing private insurers to compete directly with a traditional Medicare plan would make both stronger and create "new incentives for plans to develop better delivery models and design better ways to care for patients with chronic illnesses."

The plan would also place a cap on medical growth -- something the sustainable growth rate (SGR) already does.

Starting in 2023, any growth in the healthcare sector over 1% of the Gross Domestic Product would result in "reduced support for the sectors most responsible for cost growth," including including providers.

But unlike that universally-reviled SGR formula, the cap wouldn't trigger automatic across-the-board cuts. Instead, would be asked to step in to "fix the problem."

"Our plan would strengthen traditional Medicare by permanently maintaining it as a guaranteed and viable option for all of our nation's retirees," Wyden and Ryan wrote. "At the same time, our plan would expand choice for seniors by allowing the private sector to compete with Medicare in an effort to offer seniors better quality and more-affordable health care choices."

White House Press Secretary Jay Carney said the Obama administration opposes the plan, which he called "the wrong way to reform Medicare," and that it would "end Medicare as we know it."

"The Wyden-Ryan proposal could, over time, cause the traditional Medicare program to 'wither on the vine,' because it would raise premiums, forcing many seniors to leave traditional Medicare and join private plans," he said at a Thursday press briefing. "And it would shift costs from the government to seniors."

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